exv10w3



 







			
	Execution Copy
	 	Exhibit 10.3






EMPLOYMENT AGREEMENT (this “Agreement”) dated as

of September 29, 2005, between FLAG ACQUISITION

CORPORATION, a Delaware corporation, (the “Merger

Sub”), and ROBERT C. MCPHERSON III (“McPherson”).




     WHEREAS, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) made and entered
into as of the 18th day of May, 2005, by and among Flag Holdings Corporation, a Delaware
corporation (“Parent”), the Merger Sub, a wholly owned subsidiary of Parent, and Metals
USA, Inc. (the “Company”), Parent will acquire all of the capital stock of the Company by merging
(the “Merger”) Merger Sub with and into the Company (the “Transaction”);



     WHEREAS, as a further inducement to Parent’s and the Merger Sub’s entry into the Merger
Agreement, the Merger Sub is entering into this Agreement;



     WHEREAS, in connection with the Transaction, the Company desires, as the Surviving Corporation
(as that term is defined in the Merger Agreement) in the Merger, to employ McPherson and McPherson
desires to be employed by the Company; and



     WHEREAS, McPherson, as a condition of his employment, will make a substantial investment in
Parent concurrently with the closing of the Transaction by purchasing 27,000 shares of common stock
of Parent, par value $0.01, at a price of $10 per share;



     NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:



     Section 1. Employment Period.



     The initial term of McPherson’s employment hereunder shall be for a period of two (2) years
(the “Initial Term”) commencing on the closing of the Transaction (the “Effective Date”)
and ending on the second anniversary of the Effective Date, unless terminated earlier pursuant to
Section 3 of this Agreement (the ‘Employment Period”); provided, however, that the
Employment Period shall automatically be renewed for successive one (1) year terms upon the
Expiration of the Initial Term unless either party gives at least ninety (90) days written notice
of its intention not to renew the Employment Period. Upon McPherson’s termination of employment
with the Company for any reason, he shall immediately resign all positions with the Company or any
of its subsidiaries or affiliates.



     Section 2. Terms of Employment.



          (a) Position. During the term of McPherson’s employment, McPherson shall serve as
Senior Vice President and Chief Financial Officer of the Company and perform such duties and
responsibilities customary to such position.




 









 








          (b) Duties. During the term of McPherson’s employment, McPherson agrees to devote all
of his business time to the business and affairs of the Company and to use McPherson’s reasonable
best efforts to perform faithfully, effectively and efficiently his responsibilities and
obligations hereunder. Notwithstanding the foregoing, nothing herein shall prohibit McPherson from
(i) serving on civic or charitable boards or committees, (ii) delivering lectures or fulfilling
speaking engagements and (iii) managing personal investments, so long as such activities do not
materially interfere with the performance of McPherson’s responsibilities hereunder.




          (c) Compensation.




               (i) Base Salary. During the term of McPherson’s employment, McPherson shall receive
an initial annual base salary in an amount equal to $300,000 (the “Annual Base Salary”),
less all applicable withholdings, which shall be paid in accordance with the customary payroll
practices of the Company. Notwithstanding anything herein, the Annual Base Salary will not be
reduced without McPherson’s consent, unless the reduction is related to a broader compensation
reduction that is not limited to McPherson and does not exceed 10% of his Annual Base Salary.



               (ii) Bonuses. For fiscal year 2005, McPherson shall be eligible to receive a bonus
pursuant to the plan as in existence prior to the Effective Date in an amount to be determined by
the Company’s Board of Directors (the “Board”) in good faith. Thereafter, during the
Employment Period, the Company shall establish a bonus plan for each fiscal year (the
“Plan”) pursuant to which McPherson will be eligible to receive an annual bonus (the
“Bonus”). The Board or the Compensation Committee of the Board will administer the Plan
and establish performance objectives for each year to be mutually agreed upon with McPherson. In
the event that the Company achieves target based on actual performance, McPherson shall be entitled
to receive a Bonus in an amount equal to 70 percent of the Annual Base Salary. McPherson will be
entitled to receive the Bonus only upon the Company’s achievement of the specified performance
objectives and if McPherson is employed on the last day of the applicable performance period
(subject to Section 4). The Bonus shall become payable on or before March 15 following the end of
the applicable fiscal year provided that the Board or Compensation Committee finally determines (x)
that the Company has achieved the applicable performance objectives and (y) the amount of bonuses
that shall be paid to each executive entitled to receive a bonus for the applicable bonus year.
Notwithstanding the immediately preceding sentence, in the event McPherson’s employment is
terminated: (A) by the Company without Cause; or (B) by McPherson for Good Reason, McPherson shall
be entitled to receive a prorated Bonus for the year in which termination occurs, based on actual
performance for such year, the amount of which prorated bonus, if any, shall be determined and paid
promptly following the end of the year to which such bonus relates.



               (iii) Compensation Consultant. Following the Effective Date, the Company shall retain
a compensation consulting firm to conduct a comprehensive review, following which the Board shall
consider, in its sole discretion, increasing McPherson’s Annual Base Salary and bonus target
retroactively to the Effective Date.



2









 





               (iv) Benefits. During the term of McPherson’s employment hereunder, he shall be
entitled to participate in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other senior executives of the Company and shall be eligible for
participation in and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company to the extent applicable generally to other senior executives
of the Company. The benefits provided to McPherson shall be in the aggregate equal to those
benefits that McPherson was receiving at the Company immediately prior to the Effective Date. The
benefits provided to McPherson shall be in the aggregate equal to those benefits that McPherson was
receiving at the Company immediately prior to the Effective Date. Notwithstanding anything in this
Section 2(c)(iv) to the contrary, all benefit obligations are subject to guidance issued by the
U.S. Department of Treasury under Section 409A of the Code. To the extent required, the Company
may modify the benefits provided under this Section 2(c)(iv) to comply with such guidance;
provided, however, that the aggregate value of benefits provided to McPherson after such
modification shall not be less than the aggregate value of the benefits provided to him prior to
the modification.



               (v) Expenses. During the term of McPherson’s employment, McPherson shall be entitled
to receive reimbursement for all reasonable expenses incurred by McPherson in performance of his
duties hereunder provided that McPherson provides all necessary documentation in accordance with
Company policy.



               (vi) Vacation and Holidays. During the term of McPherson’s employment, McPherson
shall be entitled to five weeks of paid vacation.



               (vii) Stock Options. Concurrent with the closing of the Transaction, Parent shall
grant McPherson stock options (the “Executive Options”) to purchase 49,500 shares of common
stock of the Parent at an exercise price of $10 per share pursuant to the terms and conditions set
forth in the Parent’s 2005 Stock Incentive Plan (the “Stock Incentive Plan”). The
Executive Options shall be subject to the terms of the Stock Incentive Plan and McPherson’s
Non-Qualified Stock Option Agreement.



               (viii) Restricted Stock. Concurrent with the closing of the Transaction, the Parent
shall grant McPherson 5,500 shares of its common stock, par value $.01 (the “Stock Grant”). The
Stock Grant will be pursuant to the terms and conditions set forth in the Stock Incentive Plan and
will be subject to the terms of the Stock Incentive Plan and McPherson’s Restricted Stock
Agreement.



          (d) Investment. Concurrent with the closing of the Transaction, McPherson shall
purchase 27,000 shares of common stock of the Parent, par value $0.01, at a price of $10 per share.




     Section 3. Termination of Employment.



          (a) Death or Disability. McPherson’s employment shall terminate automatically upon
McPherson’s death. If McPherson becomes subject to a Disability during the Term of Employment
(pursuant to the definition of Disability set forth below), the Company may give McPherson written
notice in accordance with Sections 3(e) and 10(h) of its intention to terminate McPherson’s
employment. For purposes of this Agreement, “Disability” means (i)




3









 







McPherson’s inability to engage in any substantial gainful activity by reason of any medically
determinable physical of mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident or health plan
covering employees of the Company.




          (b) Cause. McPherson’s employment may be terminated at any time by the Company for
Cause. For purposes of this Agreement, “Cause” shall mean (i) the commission of a felony or a
crime of moral turpitude; (ii) a willful commission of a material act of dishonesty involving the
Company; (iii) a material non-curable breach of McPherson’s obligations hereunder or any other
agreement entered into between McPherson and the Company or any of its subsidiaries or affiliates;
(iv) any material breach of the Company’s policies or procedures that is not reasonably curable in
the Company’s sole discretion; (v) any other willful misconduct which causes material harm to the
Company or its business reputation, including due to any adverse publicity; (vi) a failure by
McPherson to cure a material breach of his obligations under this Agreement, the Investor Rights
Agreement among the shareholders of Parent, the Subscription Agreement between McPherson and Parent
or the Non-Qualified Stock Option Agreement between McPherson and Parent within 30 days after
written notice of such breach; or (vii) a material breach of any of McPherson’s representations
contained in this Agreement.




          (c) Termination Without Cause. The Company may terminate McPherson’s employment
hereunder without cause at any time.




          (d) Good Reason. McPherson’s employment may be terminated at any time by McPherson
for Good Reason or without Good Reason upon ninety (90) days prior written notice. For purposes of
this Agreement, “Good Reason” means voluntary resignation after any of the following actions are
taken by the Company or any of its subsidiaries without McPherson’s consent: (i) a reduction in
McPherson’s Annual Base Salary or Bonus potential described in Section 2(c)(ii) of this Agreement
(but not including any diminution related to a broader compensation reduction that is not limited
to any particular employee or executive); (ii) a material diminution of McPherson’s
responsibilities as Senior Vice President and Chief Financial Officer; (iii) relocation of
McPherson’s primary work place, as assigned to him by the Company, beyond a fifty (50) mile radius
from Houston, Texas; or (iv) a material breach by the Company of this Agreement; provided, however,
that none of the events described in the foregoing clauses (i), (ii), (iii) or (iv) shall
constitute Good Reason unless McPherson shall have notified the Company in writing describing the
events which constitute Good Reason and then only if the Company shall have failed to cure such
events within thirty (30) days after the Company’s receipt of such written notice.




          (e) Notice of Termination. Any termination by the Company for Cause or without Cause,
or by McPherson for Good Reason or without Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(h). For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to

4









 








provide a basis for termination of McPherson’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date. The failure by McPherson or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of McPherson or the Company hereunder or preclude McPherson or the
Company from asserting such fact or circumstance in enforcing McPherson’s or the Company’s rights
hereunder.




          (f) Date of Termination. “Date of Termination” means (i) if McPherson’s employment is
terminated by the Company for Cause, without Cause or by reason of Disability, or by McPherson for
Good Reason or without Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein pursuant to Section 3(e), as the case may be and (ii) if McPherson’s
employment is terminated by reason of death, the date of death.




     Section 4. Obligations of the Company upon Termination.



          (a) With Good Reason; Other Than for Cause, Death, Disability or Upon the Company’s
Election Not to Renew the Employment Period. If during the Employment Period, the Company
shall terminate McPherson’s employment other than for Cause, McPherson shall terminate his
employment for Good Reason, the termination of McPherson’s employment in any case is not due to his
death or Disability or upon the Company’s election not to renew the Employment Period, then the
Company will provide McPherson with the following severance payments and/or benefits:




               (i) The Company shall pay to McPherson in a lump sum (i) the Annual Base Salary through the
Date of Termination to the extent not paid, and (ii) to the extent not previously paid, the Bonus
earned for any year prior to the year in which the Date of Termination occurs to the extent that
McPherson is employed on the last day of the applicable performance period such Bonus to be paid in
accordance with the terms of the Plan. (“Accrued Obligations”);



               (ii) After the Date of Termination, the Company will, in its sole discretion, either (a)
continue to pay McPherson his Annual Base Salary until the earlier of (i) the end of the eighteenth
month following the Date of Termination (the “Severance Period”), and (ii) the date, if
any, McPherson violates the terms of this Agreement; or (b) a lump sum equal to eighteen months of
McPherson’s Annual Base Salary; provided, however, that in the event that such payment is made in a
lump sum and McPherson subsequently violates the terms of this Agreement in any material respect,
in addition to any other remedy that the Company may have at law or in equity, McPherson shall
immediately return such payment.



               (iii) The Company will pay McPherson a prorated Bonus for the year in which termination
occurs, based on actual performance for such year, the amount of which prorated bonus, if any,
shall be determined and paid on or before March 15 of the year immediately following the end of the
year to which such bonus relates.



               (iv) After the Date of Termination, provided McPherson elects to continue his and his
beneficiaries’ participation in the Company’s medical benefit plan in which they participated prior
to the Date of Termination pursuant to the Consolidated Omnibus Budget



5









 




Reconciliation Act of 1986 (“COBRA”), the Company will reimburse McPherson for the monthly
cost of continuing such coverage within 10 business days of each payment by McPherson for the
lesser of: (x) eighteen months following the Date of Termination; and (y) the period preceding the
date that McPherson becomes eligible to receive medical coverage under another employee benefit
plan (“COBRA Benefits”).



Thereafter, the Company shall have no further obligation to McPherson or his legal representatives.




          (b) Death or Disability. If McPherson’s employment shall be terminated by reason of
McPherson’s death or Disability, then the Company will provide McPherson with the following
severance payments and/or benefits:




               (i) The Company shall pay McPherson or his legal representatives (A) the Accrued Obligations;
(B) a lump sum equal to twelve months of McPherson’s Annual Base Salary; (C) the continuance of
death or Disability benefits thereafter in accordance with the terms of such plans then in effect;
and (D) COBRA Benefits. With respect to the COBRA Benefits, provided McPherson elects to continue
his and his beneficiaries’ medical coverage under COBRA, McPherson shall be responsible for the
portion of the monthly premium for which he was responsible prior to the Date of Termination, which
amount will be withheld from McPherson’s lump sum payment under (B) above and the Company shall pay
the remainder of the monthly premium. Thereafter, the Company shall have no further obligation to
McPherson or his legal representatives.



               (ii) In addition, in the event of McPherson death, McPherson’s beneficiary may, by written
notice delivered to the Company within one hundred and eighty (180) days of McPherson’s death ,
elect to sell all or any portion of the shares of common stock of Parent held by McPherson
(including any shares of the Parent’s common stock received upon a distribution from any deferred
compensation plan or any common stock issuable upon exercise of any options held by McPherson) for
Fair Market Value (as each such term is defined in the Investor Rights Agreement dated May 18, 2005
(the “Investor Rights Agreement”). The determination date for purposes of determining the
Fair Market Value shall be the closing date of the purchase of the applicable shares. The closing
date of the sale purchase pursuant to this Section 4(b)(ii) shall take place on a date designated
by the Company or its subsidiaries (or their designee), as applicable, in accordance with the
provisions of the Investor Rights Agreement. Notwithstanding the foregoing, the Company shall have
no obligation to repurchase McPherson’s common stock if: (x) such purchase would violate any
restriction imposed on the Company by federal law, Delaware General Corporate Law or other
applicable law; (y) the purchase would constitute a breach or other violation of the Company’s or
its subsidiaries’ debt and equity financing agreements or any other agreements concerning the
Company’s Indebtedness (as that term is defined in the Investor Rights Agreement); or (z) the
Company and its subsidiaries lack current or project a future lack of cash reserves in excess of
the Company’s and its subsidiaries cash operating requirements to finance the purchase.



          (c) Cause; Other than for Good Reason. If McPherson’s employment shall be terminated
by the Company for Cause or by McPherson without Good Reason, then the Company shall have no
further payment obligations to McPherson other than for payment of the




6









 







Accrued Obligations. Thereafter, the Company shall have no further obligation to McPherson,
other than any indemnification rights he may have pursuant to Section 9, provided, however, that
the Company shall have no obligation to indemnify McPherson for any act resulting in his
Termination for Cause.




          (d) Separation Agreement and General Release. The Company’s and obligations to make
payments under Sections 4(a) and 4(b) will be conditioned on McPherson or his legal representatives
executing and delivering a mutually agreeable separation agreement and general release of the
Company and its Subsidiaries in a form acceptable to the Company, which form shall include inter
alia a general release of McPherson, but not a release of any claims arising out of (i) McPherson’s
willful misconduct or criminal acts; or (ii) third party.




     Section 5. Nondisclosure and Nonuse of Confidential Information.



          (a) McPherson shall not disclose or use at any time, either during the Employment Period or
thereafter, any Confidential Information (as hereinafter defined) of which McPherson is or becomes
aware, whether or not such information is developed by him, except to the extent that such
disclosure or use is directly related to and required by McPherson’s performance in good faith of
duties assigned to McPherson by the Company. McPherson will take all appropriate steps to
safeguard Confidential Information in his possession and to protect it against disclosure, misuse,
espionage, loss and theft. McPherson shall deliver to the Company at the termination of the
Employment Period, or at any time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies thereof) relating to
the Confidential Information or the Work Product (as hereinafter defined) of the business of the
Company or any of its Affiliates which McPherson may then possess or have under his control.




          (b) As used in this Agreement, the term “Confidential Information” means information
that is not generally known to the public and that is used, developed or obtained by the Company in
connection with its business, including, but not limited to, information, observations and data
obtained by McPherson while employed by the Company or any predecessors thereof (including those
obtained prior to the date of this Agreement) concerning (i) the business or affairs of the Company
(or such predecessors), (ii) products or services, (iii) fees, costs and pricing structures, (iv)
designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including
operating systems, applications and program listings, (viii) flow charts, manuals and
documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and whether or not reduced
to practice, (xii) customers and clients and customer or client lists, (xiii) other copyrightable
works, (xiv) all production methods, processes, technology and trade secrets, and (xv) all similar
and related information in whatever form. Confidential Information will not include any
information that has been published in a form generally available to the public prior to the date
McPherson proposes to disclose or use such information. Confidential Information will not be
deemed to have been published or otherwise disclosed merely because individual portions of the
information have been separately published, but only if all material features comprising such
information have been published in combination.




7









 








          (c) As used in this Agreement, the term “Work Product” means all inventions,
innovations, improvements, technical information, systems, software developments, methods, designs,
analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or
related information (whether patentable or unpatentable) which relates to the Company’s or any of
its Affiliates’ actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by McPherson (whether or not during
usual business hours and whether or not alone or in conjunction with any other person) while
employed if and to the extent such Work Product results from any work performed for the Company,
any use of the Company’s premises or property or any use of the Company’s Confidential Information)
by the Company (including those conceived, developed or made prior to the date of this Agreement)
together with all patent applications, letters patent, trademark, trade name and service mark
applications or registrations, copyrights and reissues thereof that may be granted for or upon any
of the foregoing.




     Section 6. Non-Solicitation; Non-Compete.



          (a) During the period commencing on the Effective Date and ending on the twenty-four (24)
month anniversary of the Date of Termination for any reason, McPherson shall not directly or
indirectly through another Person (i) induce or attempt to induce any employee of the Company or
any Affiliate of the Company to leave the employ of the Company or such Affiliate, or in any way
interfere with the relationship between the Company or any such Affiliate, on the one hand, and any
employee thereof, on the other hand, (ii) hire any person who was an employee of the Company or any
Affiliate of the Company until eighteen (18) months after such individual’s employment relationship
with the Company or such Affiliate has been terminated or (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or any Affiliate of the
Company to cease doing business with the Company or such Affiliate, or in any way interfere with
the relationship between any such customer, supplier, licensee or business relation, on the one
hand, and the Company or any Affiliate, on the other hand.




          (b) McPherson acknowledges that, in the course of his employment with the Company and/or its
Affiliates and their predecessors, he has become familiar, or will become familiar, with the
Company’s and its Affiliates’ and their predecessors’ trade secrets and with other confidential
information concerning the Company, its Affiliates and their respective predecessors and that his
services have been and will be of special, unique and extraordinary value to the Company and its
Affiliates. Therefore, McPherson agrees that, during the period commencing on the Effective Date
and continuing through the eighteen (18) month anniversary of the date of termination for any
reason (the “Restricted Period”), McPherson shall not directly or indirectly, engage in the
fabrication, sale or distribution of any product fabricated, sold or distributed by the Company or
its subsidiaries on the Date of Termination or during the Restricted Period anywhere in the United
States in which the Company or its subsidiaries is doing business. For purposes of this Agreement,
the phrase “directly or indirectly engage in” shall include any direct or indirect
ownership or profit participation interest in such enterprise, whether as an owner, stockholder,
partner, joint venturer of or otherwise, and shall include any direct or indirect participation in
such enterprise as an employee, consultant, licensor of technology or otherwise. Nothing herein
shall prohibit McPherson from being a passive owner of

8









 








not more than 4.9% of the outstanding equity interest in any entity which is publicly traded,
so long as McPherson has no active participation in the business of such corporation.




          (c) In the event (i) McPherson materially breaches the terms of this Agreement (including
Section 5 or this Section 6 hereof), or materially breaches the terms of any other agreement
between McPherson and the Company or its subsidiaries; (ii) McPherson’s employment is terminated by
the Company for Cause; (iii) McPherson resigns his employment for any reason other than Good Reason
prior to the first anniversary of the Effective Date; or (iv) McPherson experiences a Bankruptcy
Event (as that term is defined in the Investor Rights Agreement), then Parent (or its designee)
shall have the right, but not the obligation, to repurchase all or any portion of the shares of
common stock of Parent held by McPherson (including any shares of Parent’s common stock received
upon a distribution from any deferred compensation plan or any common stock issuable upon exercise
of any options held by McPherson) for the lesser of (x) Original Cost and (y) Fair Market Value (as
each such term is defined in the Investor Rights Agreement). The determination date for purposes
of determining the Fair Market Value shall be the closing date of the purchase of the applicable
shares. The closing date of the purchase pursuant to this Section 6(d) shall take place on a date
designated by the Company or its subsidiaries (or their designee), as applicable, in accordance
with the provisions of the Investor Rights Agreement. The Company (or its designee) shall have the
right to record the transfer of the shares of common stock in connection with such purchase on its
books and records without the consent of McPherson upon receipt by McPherson of payment in full
from Parent.




     Section 7. Severance Payments.



          In addition to the foregoing, and not in any way in limitation thereof, or in limitation of
any right or remedy otherwise available to the Company, if McPherson violates any provision of the
foregoing Sections 5 or 6, any severance payments then or thereafter due from the Company to
McPherson shall be terminated immediately and the Company’s obligation to pay and McPherson’s right
to receive such severance payments shall terminate and be of no further force or effect, if and
when determined by a court of competent jurisdiction that McPherson has violated Sections 5 or 6 of
this Agreement, in each case without limiting or affecting McPherson’s obligations under such
Sections 5 and 6 or the Company’s other rights and remedies available at law or equity.




     Section 8. Executive’s Representations, Warranties and Covenants.



          (a) McPherson hereby represents and warrants to the Company and Merger Sub that:




     (1) McPherson has all requisite power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby, and this Agreement has been duly executed by
McPherson;



               (2) the execution, delivery and performance of this Agreement by McPherson does not and will
not, with or without notice or the passage of time, conflict with,



9









 




breach, violate or cause a default under any agreement, contract or instrument to which
McPherson is a party or any judgment, order or decree to which McPherson is subject;




               (3) McPherson is not a party to or bound by any employment agreement, consulting agreement,
non-compete agreement, confidentiality agreement or similar agreement with any other Person;



               (4) upon the execution and delivery of this Agreement by the Merger Sub and McPherson, this
Agreement will be a legal, valid and binding obligation of McPherson, enforceable in accordance
with its terms;



               (5) McPherson understands that Merger Sub and the Company will rely upon the accuracy and
truth of the representations and warranties of McPherson set forth herein and McPherson consents to
such reliance.



          (b) The Company (and prior to the closing of the Transactions, Merger Sub on behalf of the
Company) hereby represents and warrants to McPherson that:




               (1) the Company has all requisite power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and this Agreement has been duly executed
by the Company;



               (2) the execution, delivery and performance of this Agreement by the Company does not and will
not, with or without notice or the passage of time, conflict with, breach, violate or cause a
default under any agreement, contract or instrument to which the Company is a party or any
judgment, order or decree to which the Company is subject;



               (3) upon the execution and delivery of this Agreement by the Company and McPherson, this
Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance
with its terms; and



               (4) the Company understands that McPherson will rely upon the accuracy and truth of the
representations and warranties of the Company set forth herein and the Company consents to such
reliance.



     Section 9. Indemnification.



          The Company shall secure Directors’ and Officers’ liability insurance for the benefit of
McPherson and shall indemnify McPherson to the maximum extent permitted under the General Corporate
Law of Delaware for acts taken within the scope of his employment and his indemnification shall be
no less than the broadest indemnification afforded to all directors and officers of the Parent and
the Company.




     Section 10. General Provisions.



          (a) Severability. It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any

10









 








particular provision of this Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid, prohibited or unenforceable under any present or future law, and if the
rights and obligations of any party under this Agreement will not be materially and adversely
affected thereby, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the validity or enforceability
of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable
provision there will be added automatically as a part of this Agreement, a legal, valid and
enforceable provision as similar in terms to such invalid or unenforceable provision as may be
possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not
to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction,
be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.




          (b) Entire Agreement. This Agreement, the Investor Rights Agreement, the Subscription
Agreement, the Stock Incentive Plan, the Non-Qualified Stock Option Agreement and the Restricted
Stock Agreement embody the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have related to the subject
matter hereof in any way. For the avoidance of doubt, McPherson and Merger Sub (or, from and after
the closing of the Transaction, the Company) acknowledge that any agreement between McPherson and
Metals USA, Inc. entered into prior to the Effective Date, including without limitation, any
employment agreement, shall be of no further force and effect as of the Effective Date.




          (c) Counterparts. This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one and the same
agreement.




          (d) Successors and Assigns.




               (i) This Agreement is personal to McPherson and without the prior written consent of Merger
Sub (or, from and after the closing of the Transaction, the Company) shall not be assignable by
McPherson otherwise than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by McPherson’s legal representatives.



               (ii) Effective as of the Closing of the Transaction, the Merger Sub will require the Company
to assume and agree to perform this Agreement.



               (iii) This Agreement shall inure to the benefit of and be binding upon Merger Sub (or, from
and after the closing of the Transaction, the Company) and its successors and assigns. The Company
will require any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore



11









 




defined and any successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.




          (e) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING
PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW
ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.




          (f) Remedies. Each of the parties to this Agreement and any such person or entity
granted rights hereunder whether or not such person or entity is a signatory hereto (including,
without limitation, Apollo Management V, L.P. and its Affiliates) shall be entitled to enforce its
rights under this Agreement specifically to recover damages and costs for any breach of any
provision of this Agreement and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement, including Sections 5 and 6 of this Agreement, and that the Company
may in its sole discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or other injunctive relief (without posting any bond or deposit) in order
to enforce or prevent any violations of the provisions of this Agreement or require McPherson to
account for and pay over to the Company all economic benefits derived from or received as a result
of any transactions constituting a breach of the covenants contained herein in this Agreement, if
and when final judgment of a court of competent jurisdiction is so entered against McPherson. Each
party shall be responsible for paying its own attorneys’ fees, costs and other expenses pertaining
to any judgment or verdict unless the court awards otherwise.




          (g) Amendment and Waiver. The provisions of this Agreement may be amended and waived
only with the prior written consent of Merger Sub (or, from and after the closing of the
Transaction, the Company) and McPherson and no course of conduct or failure or delay in enforcing
the provisions of this Agreement shall be construed as a waiver of such provisions or affect the
validity, binding effect or enforceability of this Agreement or any provision hereof.




          (h) Notices. Any notice provided for in this Agreement must be in writing and must be
either personally delivered, transmitted via telecopier, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier service (charges
prepaid) to the recipient at the address below indicated or at such other address or to the
attention of such other person as the recipient party has specified by prior written notice to the
sending party. Notices will be deemed to have been given hereunder and received when delivered
personally, when received if transmitted via telecopier, five days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service.




12









 







If to the Company, to:



Metals USA, Inc.

One Riverway, Suite 1100

Houston, Texas 77056

Facsimile: (713) 965-9967

Attention: Chairman of the Board



with a copy (which shall not constitute notice) to:



The Apollo Group

9 West 57th Street

New York, New York 10019

Facsimile: (212) 515-3288

Attention Marc Becker



and



Dreier LLP

499 Park Avenue

New York, New York

Facsimile: (212) 328-6101

Attention: Andrew Bernstein, Esq.




          If to McPherson, to McPherson’s address set forth on the signature page hereto.




          (i) Survival of Representations, Warranties and Agreements. All representations,
warranties and agreements contained herein shall survive the consummation of the transactions
contemplated hereby indefinitely.




          (j) Effectiveness. Notwithstanding the foregoing, none of Parent, Merger Sub or the
Company shall have any obligations to McPherson or his beneficiaries under this Agreement in the
event McPherson is unable to perform his duties hereunder or commits an act that constitutes Cause
under Section 3(b) prior to the closing of the Transaction and this Agreement shall be of no force
and effect. Further, this Agreement shall become of no force or effect if the Transaction does not
close on or before December 15, 2005.




          (k) Descriptive Headings. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.




          (l) Construction. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates. The language used in
this Agreement shall be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.




          (m) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.




13









 





          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.




	 	 	 	 	 	 	 
	 	 	FLAG ACQUISITION CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ M. Ali Rashid 	 	 
	 

	 	 	 	 

Name:  M. Ali Rashid

Title:    President
	 	 
	 
	 	 	 	 	 	 










	 	 	 	 	 	 	 
	 	 	ROBERT C. McPHERSON III	 	 
	 
	 	 	 	 	 	 
	 

	 	Signature:	 	/S/ ROBERT C. McPHERSON III	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Residence Address:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 






14